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Write-offs to Remember - Deductions in the Loan Process

Write-offs are the government's way of rewarding taxpayers when they've done something the government likes. And to judge by the write-offs, the government likes it when people borrow money to buy a house. There are write-offs aplenty, many of which people often forget.Make sure your clients take advantage of every break the IRS will give. Here are a few they tend to forget:Points:According to the IRS, origination fees charged as points must be paid for the use of money, (for example, to obtain a lower interest rate) in order to be tax deductible. Origination fees that constitute a "service fee" are not tax deductible. The question must be asked, "Does the fee apply to the use of money, or is it a service charge?"Discount points are paid to secure a lower interest rate. IRS Publication 936 lists a general rule that states, "You generally cannot deduct the full amount of points in the year paid. Because they are prepaid interest, you generally must deduct them over the life (term) of the mortgage." However, there are conditions which, if met, make discount points tax deductible in the year they are paid. (For more details on points and deductions, see http://www.irs.gov/publications/p936/ar02.html#d0e942.)Pre-payment penalties:Unforeseen circumstances ... more

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